Question

·         As a professional accountant, how would the process for completing the practice set assignment (a manual accounting process) be used in an accounting department. Explain how communication, teamwork, time management and interpersonal skills play a role in completing this process within an accounting department?

·         When (why) would you use this system rather than an automated accounting system?

·         What are the benefits and limitations of each type of system (manual vs computer)?

Answer 1

1.Manual accounting systems are most commonly used by small businesses, as these systems have lower upfront cost less than complex accounting software and are relatively easy to use. New or small businesses may not have many financial entries to make and, therefore, their accounting needs are simple. As long as the person in charge of manually keeping the financial records knows what he or she is doing, it can be just as accurate as a computerized accounting system. Another advantage of using a manual accounting system is that you can always open up the book and gain instant access to your records. There is no delay due to power or Internet outages, and there are no risks of sensitive information being hacked online.

The work performance of the team is higher than individual performance when the work requires a broader scope of knowledge, judgement and opinion. The advantage of teamwork is significant productivity growth in the spheres that require creative solving of different tasks, a high degree of adaptability and operational management. Teamwork also creates an environment that facilitates knowledge and information exchange and so-called knowledge sharing. Other advantages are the ability of new forms of work organisation to increase the potential for innovation that may add value to products or services, moving them into less price-sensitive markets. Moreover, the ability of new forms of work organisation to increase the employability of workers through multi-skilling and the acquisition of higher competencies in problem solving, communication and teamworking will help labour market adaptation, and also support new forms of local and regional economic growth and regeneration (Totterdill, Dhondt and Milsome, 2002; OECD , 2000). Teamwork could lead to more job autonomy, greater responsibility and higher job satisfaction.

A high performance workplace invests in its human resources and supports both their technical and innovation skills and their social skills; this promotes good interpersonal relationships in the workplace from which the company can also benefit. This type of organisation is different from the Taylorist work organisation, which is characterised by task specialisation, a pyramid hierarchical structure and a centralisation of responsibilities.

2.

When running a business, you have to decide on what type of accounting system you wish to use. You can choose between using a manual accounting system or a computerized one. While computerized systems are convenient, there are some distinct advantages that manual accounting systems can provide.

Avoid Corrupt Data

One of the benefits of using a manual accounting system is that you know your documents will always be available when you need them. This is not always the case when you use a computerized system. When you use a computerized accounting system, many times the data will become corrupted, and you will not be able to access the information any longer. At that point, you could potentially lose years' worth of data that you desperately need for your business.

Duplication Mistakes

When using a manual accounting system, you do not have to worry about duplication errors. With a computerized system, there is a chance you will duplicate the wrong file and use an outdated set of numbers. With a manual system, you simply have a book with your data in it. Duplicating the data would be a very involved process, which is not likely to occur. This helps you avoid using the wrong data.

Making Changes

Another advantage of manual accounting systems is that they are easier to make changes to. When you need to change an entry on your ledger, you simply take an eraser and erase the entry. Then you can write the new entry in the blank. When you need to change an entry in your computerized accounting system, you may have to type in a password and find the appropriate file before you can change it. This takes additional time and can create problems.

Accessibility

Another advantage of using a manual accounting system is that it is easily accessible to anyone who needs the information. For example, business owners may rely on their accounting staff to handle the accounting software and the information in it. If the owners need access to some data in the system, they have to wait on someone from the accounting department to get it for them. With a manual system, they can easily look in the book and get the information themselves.

3.

BENEFITS OF MANUAL ACCOUNTING SYSTEM :-

Avoid Corrupt Data

One of the benefits of using a manual accounting system is that you know your documents will always be available when you need them. This is not always the case when you use a computerized system. When you use a computerized accounting system, many times the data will become corrupted, and you will not be able to access the information any longer. At that point, you could potentially lose years' worth of data that you desperately need for your business.

Duplication Mistakes

When using a manual accounting system, you do not have to worry about duplication errors. With a computerized system, there is a chance you will duplicate the wrong file and use an outdated set of numbers. With a manual system, you simply have a book with your data in it. Duplicating the data would be a very involved process, which is not likely to occur. This helps you avoid using the wrong data.

Making Changes

Another advantage of manual accounting systems is that they are easier to make changes to. When you need to change an entry on your ledger, you simply take an eraser and erase the entry. Then you can write the new entry in the blank. When you need to change an entry in your computerized accounting system, you may have to type in a password and find the appropriate file before you can change it. This takes additional time and can create problems.

Accessibility

Another advantage of using a manual accounting system is that it is easily accessible to anyone who needs the information. For example, business owners may rely on their accounting staff to handle the accounting software and the information in it. If the owners need access to some data in the system, they have to wait on someone from the accounting department to get it for them. With a manual system, they can easily look in the book and get the information themselves.

LIMITATIONS OF MANUAL ACCOUNTING SYSTEM :-

There can be many disadvantages of using a manual accounting system. Accounting, for any business, can be a complex undertaking. A manual accounting system requires you to understand the accounting process in a way that may be unnecessary with a computerized accounting system. This can be an advantage or a disadvantage, depending on the person doing the bookkeeping; often, a specially trained professional is needed to ensure that accounting is done properly.

Unraveling the complexity of your financial records by hand may be time consuming. Since it takes time to generate reports, you may be neglecting other aspects of the business and miss opportunities for growth. Human error also plays a role in inaccurate financial records; manual accounting can be tiresome and tedious, causing bookkeepers to make mistakes. Additionally, records may only be available in paper format, which can cause issues if they are lost, stolen, or damaged.

BENEFITS OF AUTOMATED ACCOUNTING SYSTEM :-

Automation: Since all the calculations are handled by the software, computerized accounting eliminates many of the mundane and time-consuming processes associated with manual accounting. For example, once issued, invoices are processed automatically making accounting less time-consuming.

· Accuracy: This accounting system is designed to be accurate to the minutest detail. Once the data is entered into the system, all the calculations, including additions and subtractions, are done automatically by software.

· Data Access: Using accounting software it becomes much easier for different individuals to access accounting data outside of the office, securely. This is particularly true if an online accounting solution is being used.

· Reliability: Because the calculations are so accurate, the financial statements prepared by computers are highly reliable.

· Scalable: When your company grows, the amount of accounting necessary not only increases but becomes more complex. With computerized accounting, everything is kept straightforward because sifting through data using software is easier than sifting through a bunch of papers.

· Speed: Using accounting software, the entire process of preparing accounts becomes faster. Furthermore, statements and reports can be generated instantly at the click of a button. Managers do not have to wait for hours, even days, to lay their hands on an important report.

· Security: The latest data can be saved and stored in offsite locations so it is safe from natural and man-made disasters like earthquakes, fires, floods, arson and terrorist attacks. In case of a disasters, the system can be quickly restored on other computers. This level of precaution is taken by Clever Accounting.

· Cost-effective: Since using computerized accounting is more efficient than paper-based accounting, than naturally, work will be done faster and time will be saved. When one considers that Clever Accounting, one of the latest online accounting solutions, starts at a low monthly subscription (check out pricing here), then computerized accounting really becomes a no-brainer.

· Visuals: Viewing your accounts using a computer allows you to take advantage of the option to view your data in different formats. You can view data in tables and using different types of charts.

LIMITATIONS OF AUTOMATED ACCOUNTING SYSTEM :-

Quality of Information

The quality of the information that a computerized accounting system provides depends on the quality of information that you input. You may enter every single check, receipt and invoice into QuickBooks, but if you haven’t set up your QuickBooks chart of accounts to accurately reflect the intricacies of your business, your efforts will yield only partial or irrelevant information. For example, if your business works with multiple types of accounts such as online retailers, brick and mortar storefronts and direct sales to customers, your accounting data won’t be especially meaningful unless you track these categories separately.

The Human Element

Although computerized accounting systems use technology to calculate sums and store information, this data must be entered by humans, and these humans must be trained. Training staff on software programs can be expensive, and knowledge needs to be updated regularly because computerized accounting systems change, sometimes every year. Mistakes happen at many stages in the learning curve, and a computerized system with formulas that build on one another is likely to compound seemingly simple errors, making the source of a problem even more difficult to find.

Cost

Virtually every aspect of a computerized accounting system is costly. Computers are exponentially more expensive than paper ledgers, and the software required for your accounting data adds a further expense which often has to be renewed or updated yearly. You may also have to shell out funds for repairs, or hire professionals for training, custom software or to untangle especially complex mishaps.

Security and Permanence

Computerized accounting systems are vulnerable to cyber security issues. Cloud-based systems store your company’s information remotely, where it can be hacked. Your system may be infected with a virus that destroys or corrupts information. Computers also crash periodically, so unless you’re especially diligent about backing up files you may lose many hours’ worth of work.